Bar­clays Brexit plan praised

UK lender sets the bar for other banks to fol­low

FRANK­FURT: Bar­clays Plc’s plan to quickly move Euro­pean busi­ness to Dublin in preparation for Brexit is one of the most am­bi­tious yet and gain­ing plau­dits from reg­u­la­tors, ac­cord­ing to sources.

The UK lender plans to book al­most half its EU-re­lated trading risk within the bloc by the time the UK leaves, ac­cord­ing to the sources. That’s a level EU reg­u­la­tors con­sider other global banks should as­pire to, even if they haven’t set spe­cific goals, the sources said.

With just four months be­fore Brexit, global banks that con­duct much of their Euro­pean busi­ness from Lon­don are brac­ing for the pos­si­bil­ity there’ll be no tran­si­tion phase or other con­di­tions to soften the blow to fi­nan­cial ser­vices. While many lenders have asked the Euro­pean Cen­tral Bank (ECB) for new or ex­panded li­cences to main­tain ac­cess to EU clients, the su­per­vi­sor hasn’t re­acted as quickly as hoped, sources said.

The ECB’s ex­pec­ta­tions for the trans­fer of risk fol­low EU reg­u­la­tory prin­ci­ples and will take ac­count of the “ma­te­ri­al­ity and com­plex­ity” of in­di­vid­ual banks’ cap­i­tal mar­kets busi­nesses, ac­cord­ing to a spokeswoman for the su­per­vi­sor, who de­clined to com­ment on spe­cific banks. Bar­clays de­clined to com­ment.

Banks in­clud­ing Gold­man Sachs Group Inc and JPMor­gan Chase & Co are still in talks with the ECB over the ex­act con­di­tions they need to meet to in­crease EU op­er­a­tions. The key stick­ing point is the vol­ume and speed at which banks need to move EU-re­lated as­sets and staff to the bloc. Sev­eral firms had hoped to ob­tain the nec­es­sary au­tho­ri­sa­tions by the mid­dle of 2018 and are now in­creas­ingly frus­trated, the sources said.

Bar­clays isn’t in that po­si­tion. The bank picked Dublin as the lo­ca­tion for its EU unit and chief ex­ec­u­tive of­fi­cer Jes Sta­ley said in Oc­to­ber that the Cen­tral Bank of Ire­land had ap­proved his firm’s ex­pan­sion there. That in­cludes a plan to book 45% of its as­sets, weighted for EU-re­lated mar­ket risk, in the coun­try by Brexit, the sources said.

UK banks in­clud­ing Bar­clays have per­haps the most to lose as Brexit ne­go­ti­a­tions drag on. The Lon­don-based firm’s shares have fallen about 20% this year and hit the low­est since September 2016 last month on the emer­gence of a po­ten­tial night­mare sce­nario. Bar­clays also had the worst show­ing of 48 banks in Europe’s tough­est stress test yet, un­der­scor­ing the vul­ner­a­bil­ity of UK lenders to weak growth, credit losses and Brexit.

Daniele Nouy, who heads the ECB’s bank­ing su­per­vi­sion arm, has said that banks’ trading and risk man­age­ment ca­pa­bil­i­ties must “com­men­su­rate” with the size and risk of the op­er­a­tions they want to re­lo­cate.

“They should move within two or three years at the most, and they will have to start with re­sources that are pro­por­tion­ate to the risk they are mov­ing over,” she said in September.

Still, most big banks plan to fin­ish the move in as lit­tle as 12 months to win ECB ap­proval, even if that time­line came as a sur­prise for many of the lenders and even some na­tional reg­u­la­tors, said the sources. — Bloomberg